IIMs’ economics: need more transparency

Re your editorial, “Value for money at IIMs”, 4 April. A fee hike from about Rs4 lakh three years ago to Rs11.5 lakh can’t be justified on the basis of a general statement that costs have risen. IIMs do not seem to have given any clear justification. IIMs should of course give the details of their costs. Also, the focus of the fee revision is only on the flagship postgraduate programme. But IIMs have started many other courses as well, such as for the Indian Army. Is the flagship being leveraged to subsidize such other programmes? Finally, the argument about the starting salaries soaring is a bit unfair. One may then argue that IIMs have become placement agencies. What if, in the future, the salaries seem to be declining—will the fees be slashed? We need more transparency.

-Paresh M.

The fee paid by an IIM student is the price for a coveted service—higher education—where demand far outstrips supply and the seller could set the price at will.

As an alumnus of an IIM, I find that the price has grown at a compounded annual rate exceeding 25% over the past two decades.

This is faster than inflation, the growth in salaries, and it also outstrips the returns delivered by the Sensex. If neither income nor savings can keep pace with the cost of higher education, then the only options to fund it are wealth or debt.

However, pricing is a tool that splits a market into segments based on the ability and willingness to pay, and to borrow. In a country where aversion to debt has been ingrained into the character, it is disingenuous to argue that the continuous escalation in price will not change the mix of students just because the option to borrow exists. It is possible that some students may be deterred by the price barrier. The possession of wealth would then become a major factor that filters the intake into an IIM. Over time, this would alter the mix of students and, possibly, their future career choices. This would be social engineering with unknown consequences for the next generation.

If IIMs continue to receive grants from the government, then fees may not really need to rise very sharply only to meet increases in costs. It could be that the institutes want to accumulate a large corpus like the university endowments in the US. If taxpayers fund the institutes, they have the right to know how such a corpus is being managed and its objectives.

In a poor country, it is bad policy to subsidize higher education while universal primary education remains a distant goal. Neither is it fair to raise fees beyond the rise in input costs that need to be passed on.

However, it could be argued that the subsidy provided by the government is actually recovered through the higher taxes paid by the alumnus on his later income. Given the rush for hiring IIM graduates, it is a reasonable presumption that they work in jobs where both incomes and tax compliance are high.

-Anand Shanbhag

We appreciate Gargi Banerjee’s interview of Citi managers Sanjay Nayar and P.S. Jayakumar, Mint, 20 March, “We are repositioning the business.” But the story is not complete.

How does the credit bureau build customer credit history? Would Mint like to publish a follow-up story? Does the bureau go by whatever the bank/lender says or does it provide a site/email ID/forum where the customer can present his/her views on the truth of the bank/lender’s statement/s? Can the bureau, by thus providing a customer interface, settle disputed credit history or does the customer have to appeal to the consumer court? The story could trigger a full discussion in Mint about the real possibility of the bureau replacing the rather overstretched consumer court in this matter.

-Nataranjan Bohidar

We thank our readers for some very interesting letters in response to our stories and columns. Do continue to write to us at yourviews@livemint.com